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Investors face a fire hose of possible stock-market catalysts during another heavy week of earnings reports as the Federal Reserve holds its May policy meeting and a wealth of economic data is released, topped off by the April jobs report on Friday.
The Dow Jones Industrial Average DJIA, -0.19% the S&P 500 index SPX, -0.19% and the Nasdaq Composite Index COMP, -0.02% all finished higher for the week and for month of April as the benchmarks closed slightly lower on Friday. The Nasdaq closed less than 2 points away from its closing record while both the Dow industrials and S&P 500 are less than 1% away from their own record highs.
With a full calendar of potential market-moving events ahead and the wild card of a geopolitical flare-up, investors will find themselves busy deciding on whether stocks are to push past those levels or to prepare the groundwork for a pullback.
“The next week is unusual in that there’s a mix of everything that’s important,” said Peter Boockvar, chief market analyst at The Lindsey Group, in an interview.
Will April data ease anxiety about first-quarter weakness?
That torrent of data and events come on the heels of the latest read on economy, which showed the weakest GDP growth in three years.
While there’s a fair amount of first-quarter data from March, much of the data is going to be from April, so investors will get a glimpse of whether a second-quarter turnaround is in the cards, Boockvar said.
“In the context of growth that was ‘punked’ in the first quarter, a lot of April data is going to show to what extent we can see a rebound,” he said.
To that end, Boockvar believes the Institute for Supply Management manufacturing data for April, due out on Monday, along with services data on Wednesday, will be the most important data points on the week, ending with April jobs figures on Friday.
Other April data due out are motor vehicle sales on Tuesday, ADP employment data on Wednesday, as well as Markit’s final manufacturing data out on Monday and services data on Wednesday.
Will anything come out of the May Fed policy meeting?
Another important metric will be the inflation reading for March, said Randy Frederick, managing director of Trading & Derivatives at Schwab Center for Financial Research.
“That’s the thing the Fed looks at the most with the probability of an interest-rate increase in June,” Frederick said in an interview. Core inflation data also comes out the day before the Fed begins its two-day policy meeting on Tuesday.
Not much is expected in the way of a rate hike from the May FOMC meeting with a less than 5% probability of a hike, according to CME Group’s FedWatch Tool. If anything, investors will be looking at Fed language for a read on an expected June rate hike.
Are consumers going to put up, or shut up?
One strategist, however, thinks that the FOMC meeting, ISM data, and inflation data are not likely to rollick markets, but data on whether consumers are putting their money where their mouth is will.
March personal spending data coming out on Monday is going to be a primary focus for Brad McMillan, chief investment officer for Commonwealth Financial Network.
“One big gap has been consumer sentiment and people opening their wallets,” McMillan said in an interview. “It’ll be a real signal if [consumer spending] disappoints one more time. We’ve seen several months where spending didn’t match sentiment and each additional month raises the possibility it’s not going to catch up.”
Congress averted a government shutdown….for a week
Then there’s what develops, or doesn’t develop, in Congress. Investors will be following if there is a vote on another health-care bill in the House on the heels of Congress kicking the government-shutdown can a week down the road.
While a government shutdown appears ominous, those in the past tend to be more damaging to politicians than to markets, notes Schwab’s Frederick. Of the 17 government shutdowns since 1976, only three of them — three of the eight that lasted for more than a week — resulted in percentage declines in the S&P 500 of 3% or more, he said.
On top of everything else, earnings season is still in full swing
Apple Inc. AAPL, -0.10% earnings will be the most watched on Tuesday, along with quarterly results from two other Dow components Pfizer Inc. PFE, +0.18% and Merck & Co. MRK, -0.40% Facebook Inc. FB, +1.73% and Tesla Inc. TSLA, +1.76% results will come on Wednesday.
So far, the S&P 500 index is on track for its first year-over-year double-digit earnings gain since 2011, with a 12.5% gain for the first quarter, according to John Butters, senior earnings analyst for FactSet.